Building Industry Association of Hawai‘i (BIA)

Aloha! Thank you all so much for inviting me to be part of this building summit. I wanted to talk a little bit about the economy and then a little bit about housing. All around us we see evidence of the dynamic relationship between housing and the economy. This summit couldn’t have come at a better time. The changing skyline in Kakaako is visible evidence of new housing units that have come on the market with more yet to come. Headlines remind us that there are thousands of people homeless, experiencing homelessness, all across the State and homelessness has reached every island in our community. Tens of thousands of new housing units are needed just to meet the existing demand. The demand for housing is tied, directly tied, to the state’s economy. Right now, tourism and military spending are the cornerstones of Hawai‘i’s economy. But we cannot rely on these alone to create the jobs that will attract and attain, and sustain, our children. It’s so appropriate that we are here in this building to talk a little bit about the past economy in Hawai‘i.

In the early 1900’s, Hawai’i was the world leader in sugar and pineapple. We had the most advanced research in the world in the varieties of sugar and pineapple that would thrive in different environments and produce the sweetest fruit. We developed and implemented the best methods to increase yields to be able to grow pineapple in a way that would produce fruit of consistent size and quality. And we invested and developed innovative technology. I don’t know how many of you remember the Ginaca machine, which was a disruptive technology that changed the pineapple industry forever. The Ginaca machine could peel, core and slice 35 pineapples a second which propelled Hawai‘i to be the number one pineapple producer in the world, and not just number one, but the dominant world position. Hawai‘i generated and captured 75% of the pineapple industry in the world.

But we also knew that global competition for sugar and pineapple was fierce and we knew that Hawai‘i’s position as the low cost producer was not sustainable, especially in light of foreign government subsidies and tariffs, and most importantly low cost labor that populated the Third World countries. So in the 1950’s we began planning for an economy that shifted away from agriculture to hospitality. We had decided more than 50 years ago that we needed a new economic driver and the hospitality industry would be it. We made investments in infrastructure, we attracted capital to build hotels and resorts, and we marketed Hawai‘i to the world. And today after 50 years or so, Hawai‘i is the number one destination on the planet bar none. We employ about 200,000 people to support the industry.

We are on our way to the fifth straight record year of visitor arrivals and spending. The challenge for all of us in the room today is what’s next, right? What is next for our community? We all know the story of our children going away to college and never coming back. For me it’s personal. My oldest daughter, Lauren, just graduated from Georgetown Law Center, has taken up a job this past September in Washington, D.C. for Wilmer and Hale. My middle daughter, Amy, graduated from the University of Rochester in nursing and is working at St. Vincent’s Hospital in Florida. And my son is a senior at Johns Hopkins in computer science. He is contemplating two job offers: one from Microsoft in Washington, and the other from Bloomberg in New York. The challenge, the story of children leaving is not something that’s foreign to most of us. We all know someone. So what do we need to do to get Amy, Lauren, Matthew, and all of your kids and grandkids back to Hawai‘i? What is the next economic driver that we need to start on today and keep at it over the next 50 years so we can build that next generation of jobs that will fuel future growth for our community and I think most importantly our children? I do know that if we work together on this new knowledge-based innovation economy that our investments today will continue to improve and create the jobs of the future. We can make Hawai‘i a thriving job center that our children can choose to call home.

And the second part of that, as I talk to my kids, is “Dad, even if we were able to find a job in Hawai‘i, would we be able to afford to come and live here?” I think that’s the challenge, that’s what we all care about in this room. That’s what we need to be committed to–to create the kind of future to leave to our children and our children’s children, the Hawai‘i that is thriving. And that’s why supporting an innovation economy and affordable housing are two key points of my Administration. We clearly are focused on doing both of those things.

In terms of innovation, it really begins with investment in our people. It means having public schools that are focused on 21st century skills that our students need to compete in the global environment. It means empowering schools and getting resources to the classrooms where they can make a difference. It’s about supporting science, technology, engineering and math curriculums that give our students the skills to compete. It’s about supporting project-based learning because we know that that’s the best way for kids to really get and grasp complex algorithms and skills that allows them to be able to compete in the future. It’s about giving our students the basics in robotics, digital media, coding and cybersecurity, which are all industries and jobs of the future. We need to be focused on ensuring that our public schools can give our students the opportunities to compete and succeed in the 21st century.

I’ve also been looking at supporting the University of Hawai‘i. In every single tech center across the country, the university is a leader in innovation and entrepreneurship. We need to encourage investments in our university so that it can lead the way in the next generation of jobs and business creation because that’s what happens in thriving economies. It’s about being focused in those industry sectors where Hawai‘i has a clear competitive advantage. It’s about supporting ocean and earth sciences, space research. It’s about a focus on cybersecurity because of that opportunity, and coding because I think it’s something that is becoming more pervasive as our technology improves.

It is about building and changing the culture in state government. I truly believe in leading by example and I’ve been committing to change the corporate culture in state government to embrace change and innovation. I had the opportunity to speak with Mike Buskey, the CEO of GameStop, to talk about the future and training opportunities. And Mike talked about the fact that he knew that if the rate of change inside of his company ever fell behind the rate of change in the general community, his company was doomed to failure. If you think about what that means for state government, if we are not able to change government at the same rate of change that is occurring in our community, what happens to government? I definitely am committed to looking for opportunities to change the culture in state government and I just wanted to give you one example. We just held the Hawai‘i Annual Code Challenge. David Lassner and Todd Nacapuy and myself were judging an AT&T Hackathon about five months ago. And we just talked about it, and said “Wouldn’t it be great to have a Hackathon for state government?” So what’s so great about the first Hawai‘i Annual Code Challenge? It really is about transforming what it looks like inside state government. I challenged the departments to engage the community to help and invite the community to be part of the challenges that they face in being more efficient and effective operations. So a number of agencies had volunteered to be the targets of the Hackathon. And then we invited the software development community in Hawai‘i to be part of the solution.

To come in, to study with us the challenges of state government, and to develop software applications and phone applications that would help us to be more successful. And the First Annual Hawai‘i Annual Code Challenge was a smashing success on all fronts. First, it really did teach the government agencies that engaging the community is really positive. We had at least five or six top quality applications developed for $10,000 in prize money that will make the agencies, the four agencies that participated, instantly more effective and efficient. And we did it for about $10,000. Not only that, it builds trust in state government, that engaging the community and sharing their concerns can invite them to be part of the solution, and we had tremendous support from the coding community here, right here in Hawai‘i. Third thing it does is, I’m trying to change the philosophy of all of us to really believe that we can do it here.

Remember, Hawai‘i didn’t become number one in sugar and pineapple because somebody else gifted them, right? They decided that they wanted to be the best in the world. They made an investment in disruptive technology, and they worked it. So it really is about all of us believing that it’s in our best interest to take control of our own destinies. It’s about how we can we all encourage the philosophy of entrepreneurship and being self-reliant. It’s about giving our community the belief that they can solve these problems. So we had hundreds of coders sign up for the Code Challenge, and we developed six applications that we’re in the process of implementing. And you know what? The best team in that Code Challenge is going to the Global Hackathon representing the State of Hawai‘i. Their application dealt with homelessness, which I know is a big concern. But they developed an app that would allow a service provider to do the data collection on a homeless person on their cell phone, and they would be able to populate, get all the answers. The phone would record the specific location, the identity of the homeless person. We can get with that application real time data of which homeless are where, and where they’re moving. It would give us a tremendous opportunity to capture more information and allow us to get more data to solve the challenge of homelessness, and it cost us $10,000 in prize money. Now, I do know that the Hawai‘i team is going off to the Global Hackathon and I am confident that they will win because I do know that the people of Hawai‘i have the best creative and intellectual talent on the planet. But the Hawai‘i Annual Code Challenge is one example of what we’re doing inside to change government, to embrace innovation and change, to be able to recognize that it’s all in our best interest to take control of our own destiny, look for real solutions right here that can allow us to propel forward.

The rest of what we’re doing is really trying to support and build an ecosystem that supports entrepreneurship and innovation. It’s about making risk capital available, venture capital, to fund entrepreneurs, to create business start-ups. It’s about trying to create accelerators, focus in the core sectors that we’re pursuing. Our commitment to 100% renewable is like no other state in the world. We have the opportunity to attract investment in R&D in energy because of that environment. Again, our programs in ocean and earth sciences, astronomy, space are amongst the best in the world and we are committed to developing software and cybersecurity programs at the University of Hawai‘i so it can fuel the innovation engine that is so important to creating the jobs of the future. The innovation economy offers us the best promise of high quality, living wage jobs not only for our children, and as I said for me, it’s personal, but for all the residents of Hawai‘i.

The Digital Age, the future of our economy, is one which knowledge technology, entrepreneurship, and innovation are the center of the economic model. I think most importantly, as technology drives to the internet of things, we all hear about how the internet will become part of everything, technology will become part of each and every industry. And the opportunity is how can we embrace that and really begin to drive finding innovative solutions right here in our community that makes each and every best industry here in Hawai‘i the best that it can be.

I do know that I’ve talked a lot about innovation and I apologize. I know I talked to Gladys and Dean a little bit about what I would talk about, and I do come back to housing. A second question, as I said, that my kids ask me when we talk about where they want to live and spend the rest of their life, is housing and whether they would be able to afford to live in Hawai‘i if they were able to, if we are able to create a job for them to come back to. When we think of the current housing shortage, it’s easy to be discouraged. I know that lots of you have had many statistics but it is something that I know that we can make a difference when we work together. It was about a year ago or so when I asked a number of you here in this room to come and meet and talk about housing and about how we can generate more affordable housing for our community. We wanted to talk about what the state could do to really facilitate that process. First answer we got back was that the state could help with leveraging resources available for affordable housing. And the second was about participation in the development of regional infrastructure that prohibits development in many, especially of the older, more established communities. And so, with many of your help, we went set out to work on a housing plan to develop more affordable housing for our communities. We established a production goal of 10,000 units by the year 2020. I know that this is far less than what the demand is, but I’m a believer in being pragmatic and realistic, and establishing stretch goals but goals that we have a possibility of attaining.

We do know, and we are working with the state housing agencies to look at what opportunities are currently in the pipeline. We have empowered the Housing, Finance and Development Corporation to respond to developers’ needs by adjusting its criteria for awarding low income housing tax credits, as suggested by many of you in this room, and more importantly to begin to change the processes to be more aligned with what the developers needed. This past Legislative session we were successful with the support of the Legislature of increasing funds available to the Rental Housing Revolving Fund. We added more than $100 million total in a variety of programs that support the low income tax credits as well as commitments to community-based infrastructure that is important to green light housing developments. We also increased the total amount of funds available to affordable housing. Over the past two fiscal years, the state has set aside $180 million in private activity bonds to help develop a little more than 2,600 affordable rental units. That is more than double the amount that was invested prior to my taking office. In response to the state’s need, in response to needs for state participation in infrastructure, we worked with the Legislature to expand the application of the Dwelling Unit Revolving Fund so that the state can provide loans to the private sector to help finance regional infrastructure improvements in which the state can support the private activity. We’re also starting to see how these funds can be used to support the entire community. For example, on Hawai‘i Island, the state awarded a $500 million loan to construct the Manawalea Street extension through the new housing being built at Kamakana Villages. This mauka-makai connection will ease traffic for all the residents of Kona. I think more importantly, it was an enabler that allowed the Kamakana Villages affordable housing development to move forward as it was a condition of approval for the project.

We’ve also been focused on transit-oriented development. We believe that it is one of our biggest opportunities to sensibly direct growth, protect open space and agriculture, and reinvigorate older neighborhoods to build affordable homes. The Office of State Planning has taken the lead in working with housing agencies to identify state lands near the transit stations to participate in mixed use development. And we can’t forget that these programs are all about people. Infrastructure projects and financing tools are only the means to make sure young people just starting out know they will one day be able to buy a home. It’s about mothers and fathers who are working hard to raise their children can afford a home. It’s about seniors who have worked hard all of their lives and are in danger of being priced out of retirement here in Hawai‘i. I am committed to working together with all of you. I’m confident that we can be successful in our efforts to build an innovation, knowledge-based economy and be able to attract top talent by providing the quality of life that we know that workers want and that our economy needs. When I became Governor, one of the things I really wanted to do was make sure that these islands can be a place where our children can choose to call Hawai‘i home, a place where they can earn a decent living, have a home they can afford, and a first-rate public education system so they can feel good about the quality of education they receive and more importantly, the quality of education that their children will receive. As we move forward, we must be strategic about investing the state’s limited resources, both human and financial, to develop long-term sustainable solutions to benefit future generations here in Hawai‘i. I am committed to growing a knowledge-based economy and we will continue to work closely with all of you too, in the private sector and the counties to increase the supply of housing at all price points for the people of Hawai‘i.
I would just like to thank the Building Industry Association and all the organizers of this summit to give me the opportunity to share with you my views of the future economy and housing here in Hawai‘i. And I just want to wish you all the best for a successful summit the rest of the afternoon. Thank you.